Aggregator Business Model – What is it and how it works?

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aggregator business model

Learn the concept of aggregator business model


Would you like to earn money without getting involved in making products or providing services? If yes, the aggregator business model is just perfect for you. This model can now be seen in almost every field, such as food delivery, taxi booking, groceries, and travel.

You must have wondered how the companies based on the aggregator business model manage to accumulate different sellers and yet provide a uniform product/service.

Through this model, the company organizes the unorganized sector like hotels, taxis, etc. and provides the service under its own brand.

Let’s understand the aggregator business model in detail.

What is an Aggregator Business Model?

Aggregator business model is one of the many types of business models in which the aggregators strive to provide marketing support and customers to the goods/service providers and these providers bring their product/service to the aggregator platform. The goods or services are sold under the brand name of the aggregator while the service providers get customers through the aggregator platform. Therefore it’s a win-win model for both parties.

Aggregator’s Key Characteristic


Partnering Industry

Under a particular aggregator, all service/ goods providers belong to the same industry. The aggregator collects all the necessary information about goods or service-providers from that industry, makes them its partners, and sells their services or products under one umbrella i.e. under its own brand. Examples are Airbnb-aggregator of room renting service, Uber – aggregator of taxi service, etc.

Customers

Under the aggregator business model, the service providers as well as the consumers, are the customers of the aggregator company. It uses its brand to attract both parties to use its platform. Aggregator brand is at the public front and the customers have no idea about the goods/ service providers. Purchase is made by customers using the online platform and goods/ service providers get customers without spending on marketing.

Product/ Service Providers

Product or service providers are not the employees but the partners of the Aggregator Company.  They have full freedom to reject or accept the order received through the aggregator. Swiggy is an example of a restaurant-aggregator.

Brand Name

In the Aggregator model, all services are provided under one common brand name.

Building a brand needs efforts and funds on behalf of the aggregator. Parameters like price, quality, on-demand delivery, etc are taken care of while building a brand.

Quality

Since the brand name is the identity of the aggregator, it firmly believes in providing standard quality to its users. Therefore the aggregator lays terms and conditions that service providers are asked to agree with during the signing of the contract. Apart from this, a dedicated team is also deployed by the aggregator to ensure the standard quality is delivered.

Price

Like quality, the price is also standardized in the aggregator model for the same reason that all services or goods are provided under a common name.

Contract

A contract is an indispensable part of the aggregator business model. All the terms and conditions between the aggregator and the service provider are made clear before the final contract is signed. Under the contract, the partners agree to provide quality products/services to the customers while the aggregator focuses on attracting more customers for the service providers. Thus it turns out to be a win-win contract for both parties.

How Aggregator makes money? – The revenue model

The service providers play a key role in generating revenue for the aggregator. There are two ways of generating revenue through the aggregator business model.

In the first method, the aggregator charges a commission for every customer it brings in for the service provider through its platform. This way of revenue generation is adopted by Uber wherein it charges up to 20-25% of the commission rate from the drivers.

In the second method, the service providers fix and quote their price. The aggregator then adds-up its take-up rate to this price and quotes the final price to the customer. Oyo’s method of revenue generation used to fall under this category until a few months back wherein they leased hotel rooms at a predetermined price and provided them to the users with their take-up rate added. But now, they have a commission-based revenue generation wherein they charge 20-25% commission from the hotels.

Market Place v/s Aggregator Business Model

Marketplace like Amazon, Flipkart, etc. offers an online platform and acts as a mediator between customers and goods/service providers earning a commission from the goods/service providers. The aggregator, on the other hand, builds the brand and instead of just acting as a mediator, it acquires the ownership of the goods/services through that brand.

To Wrap Up

It won’t be surprising if a few of you wish to start the aggregator business seeing the current trend and the way this business model is disrupting many sectors. But before moving ahead to build your own aggregator business, it is important to first evaluate your startup idea. Decide your niche and do in-depth research on the goods/service providers and the various ways to attract customers to your platform. The following is the general approach for starting an aggregator business:

  1. Decide your niche.
  2. Research your goods/service providers and talk to them.
  3. Propose your partnership plan to them including your promise to get them more customers.
  4. Once these service providers agree to become your partners, you as an aggregator may start to build and market your brand to attract customers.
  5. After the brand is built, customers start to use the services of the aggregator platform.
  6. Service providers get customers and aggregator gets the commission.


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